Ownership of a vacation home, or several homes, has always been a desirable luxury of the wealthy. But today, technology is changing the way the affluent access, use and buy – or don’t buy – vacation homes around the world.
The shift in luxury spending from goods to experiences has been well documented, and since 2008, Resonance has been asking the most affluent households in the U.S. what goods, services and experiences they consider to be the most desirable. For those for whom money is largely no object, we’ve consistently found that taking exotic vacations is near the top of the list. In fact, the only luxury considered more desirable than taking vacations is owning a vacation home, which landed at the top of the list in our survey of the wealthiest 1% in the U.S. in 2015.
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With the continued growth of multi-generational luxury travel and “togethering” with family and friends, it’s not surprising that vacation home ownership continues to be an unwavering desire for those who can afford it. What’s changing, however, is the way the wealthy access and manage the vacation home experience. While the role of technology and influence of online travel agencies (OTAs) in the distribution and sale of hotel nights is endlessly discussed and debated in the travel and tourism industry, technology has also given rise to new platforms that are changing both the vacation rental and vacation home sales industries.
Although Airbnb is a poster child for the so-called sharing economy, the resort real estate industry actually invented sharing decades before the sharing economy existed. Timeshare was an accessible way of owning a vacation home through the purchase of a divided or shared interest in a vacation property. For decades, timeshare, whole ownership or renting a home or villa through a property manager were the primary means of accessing a vacation home experience (other than staying with friends or family who owned one, of course – and everyone would agree that these are the best kinds of friends and family to have).
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But just as Airbnb is disrupting the hotel industry (and perhaps the apartment-rental market even more so), so too are a number of new options and platforms changing the traditional ways of renting a vacation home – by allowing owners to directly rent out their properties to consumers online, bypassing traditional property management companies. Pioneers in the space include Vacation Rentals by Owner (VRBO) and HomeAway, which itself lists more than 1.2 million properties in 193 countries. It’s a significant shift in an industry estimated to generate more than $100 billion in revenue each year.
“While awareness of vacation rentals as an accommodation option has grown in recent years, still only 40% of Americans say they have ever stayed in one,” HomeAway’s Vice President and General Manager of North America Bill Furlong told Resonance. “With a minority of people staying in rentals, there’s still plenty of room for growth, especially as companies like HomeAway increase marketing, distribution and word-of-mouth.”
To cater to the luxury traveler, HomeAway has created a separate site that features 9,000 luxury properties that have been selected through a HomeAway algorithm based on location, décor, services, amenities and other factors. Property listings are then manually reviewed by HomeAway staff before being added to the premium site.
Other emerging rental platforms include Onefinestay, an upscale version of Airbnb that specializes in luxury homes and apartments in cities such as London, Rome, Paris and New York. Hyatt was an early investor in the company, which was acquired earlier this year by AccorHotels for $129 million.
Will other hoteliers follow suit or sit on the sidelines to see how AccorHotels fares in the vacation rental business?
Perhaps the most interesting innovation in the vacation home sector is happening in the space between vacation home rental and vacation home ownership. In so-called “Destination Clubs,” affluent travelers pay a membership fee to access a curated portfolio of serviced villas, apartments and homes managed by the club. One of the fastest-rising stars in the space is Inspirato, which has grown over the past three years from 4,000 to more than 14,000 members who share the use of 700+ properties in 150 destinations around the world.
“That family time of sharing experiences and making memories together is more important than ever, which is why the vacation rental market and our business is growing so quickly,” Inspirato Founder and Chief Experience Officer Brian Corbett told Resonance. “People want to share with others and they want the luxury and the space of a private home but they also want the service. They value the curation, the experience and the certainty that comes with staying in a vacation home that is branded.”
Indeed, research by Resonance shows that for wealthy travelers considering the purchase of a vacation property, a Destination Club is now almost as popular a choice as purchasing a vacation condominium. And as the next generation of luxury travelers grows up using services like Airbnb, and becomes accustomed to staying in residential environments, it seems likely that the popularity of this model will grow for many years to come.
While some would argue that the growing popularity of Destination Clubs and these new rental platforms may reduce demand among the affluent for luxury hotels, Inspirato’s Corbett says just the opposite is true. He says his members increasingly look to Inspirato to curate and manage all of their leisure travel experiences, so the club has aggressively selected and negotiated with hotels around the world to offer preferred rates to their members, who are frequently looking for weekend urban getaways as well.
“We have added a lot of urban and metropolitan options because that’s a big trend,” Corbett says. “We have lots of demand for New York, London, San Francisco, Paris, London, Rome. We will do about 15% of our nightly rate revenue in hotels this year, and most of that is in urban destinations.”
Ironically, when it comes to whole ownership, HomeAway’s Furlong says the rise of new platforms to rent out vacation homes, which typically sit unoccupied for much of the year, is also making the economics of whole ownership more appealing.
“Renting a vacation home is certainly a more affordable alternative to buying one, and it provides the flexibility to visit new markets and travel with groups of various sizes,” says Furlong. “However, owning a second home can be more affordable than many realize. On average, those who list their home on HomeAway.com generate $28,000 in rental income per year and 70% are able to cover half or more of their mortgages.”
For more insights and trends into the future of luxury travel, download your free 2016 Future of Luxury Travel Report here.